Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.

For purposes of the following discussion, all references to "first quarter of
2014" and "first quarter of 2013" are to the Company's 13-week fiscal periods
ended May 3, 2014 and May 4, 2013, respectively.
The following discussion should be read in conjunction with the Consolidated
Financial Statements and the related notes included elsewhere in this report, as
well as the financial and other information included in the 2013 10-K. The
following discussion contains forward-looking statements that reflect the
Company's plans, estimates and beliefs. The Company's actual results could
materially differ from those discussed in these forward-looking statements.
Factors that could cause or contribute to those differences include, but are not
limited to, those discussed below and elsewhere in this report (particularly in
"Forward-Looking Statements") and in the 2013 10-K (particularly in "Risk
Factors").
Overview
The Company is an omnichannel retail organization operating stores and websites
under two brands (Macy's and Bloomingdale's) that sell a wide range of
merchandise, including apparel and accessories (men's, women's and children's),
cosmetics, home furnishings and other consumer goods. The Company's operations
include approximately 840 stores, including thirteen Bloomingdale's Outlets, in
45 states, the District of Columbia, Guam and Puerto Rico, as well as macys.com
and bloomingdales.com. In addition, Bloomingdale's in Dubai, United Arab
Emirates is operated under a license agreement with Al Tayer Insignia, a company
of Al Tayer Group, LLC.
The Company is focused on three key strategies for continued growth in sales,
earnings and cash flow in the years ahead: (i) maximizing the My Macy's
localization initiative; (ii) driving the omnichannel business; and
(iii) embracing customer centricity, including engaging customers on the selling
floor through the Magic Selling program.
Through the My Macy's localization initiative, the Company has invested in
talent, technology and marketing which ensures that core customers surrounding
each Macy's store find merchandise assortments, size ranges, marketing programs
and shopping experiences that are custom-tailored to their needs. My Macy's has
provided for more local decision-making in every Macy's community, and involves
tailoring merchandise assortments, space allocations, service levels, visual
merchandising and special events on a store-by-store basis.
The Company's omnichannel strategy allows customers to shop seamlessly in stores
and online, via computers or mobile devices. A pivotal part of the omnichannel
strategy is the Company's ability to allow associates in any store to sell a
product that may be unavailable locally by selecting merchandise from other
stores or online fulfillment centers for shipment to the customer's door.
Likewise, the Company's online fulfillment centers can draw on store inventories
nationwide to fill orders that originate online, via computers or mobile
devices. As of May 2014, nearly all Macy's stores are fulfilling orders from
other stores and/or online, compared to 500 Macy's stores as of February 1,
2014. Also, by August of 2014, nearly all stores are expected to be fulfilling
orders for pick-up related to online purchases.
Macy's Magic Selling program is an approach to customer engagement that helps
Macy's to better understand the needs of customers, as well as to provide
options and advice. This comprehensive ongoing training and coaching program is
designed to improve the in-store shopping experience and all other customer
interactions.
The Company did not open any new stores during the first quarter of 2014, but
intends to open three new Macy's stores and one Bloomingdale's replacement store
in the remainder of fiscal 2014. During the first quarter of 2013, the Company
opened one new Macy's store and also expanded into an additional Macy's location
in an existing mall.
The Company's operations are impacted by competitive pressures from department
stores, specialty stores, mass merchandisers, online retailers and all other
retail channels. The Company's operations are also impacted by general consumer
spending levels, including the impact of general economic conditions, consumer
disposable income levels, consumer confidence levels, the availability, cost and
level of consumer debt, the costs of basic necessities and other goods and the
effects of weather or natural disasters and other factors over which the Company
has little or no control.
In recent years, consumer spending levels have been affected to varying degrees
by a number of factors, including modest economic growth, a slowly improving
housing market, a rising stock market, uncertainty regarding governmental
spending and tax policies, high unemployment levels and tightened consumer
credit. These factors have affected to varying degrees the amount of funds that
consumers are willing and able to spend for discretionary purchases, including
purchases of some of the merchandise offered by the Company.

MACY'S, INC.

The effects of economic conditions have been, and may continue to be,
experienced differently, or at different times, in the various geographic
regions in which the Company operates, in relation to the different types of
merchandise that the Company offers for sale, or in relation to the Company's
Macy's-branded and Bloomingdale's-branded operations. All economic conditions,
however, ultimately affect the Company's overall operations.
Based on its assessment of current and anticipated market conditions and its
recent performance, the Company is assuming that its comparable sales in fiscal
2014 will increase in the range of 2.5% to 3.0% from 2013 levels and that its
diluted earnings per share in fiscal 2014 will be in the range of $4.40 to
$4.50.

Net Income
Net income for the first quarter of 2014 increased $7 million or 3.2% compared
to the first quarter of 2013, reflecting a higher gross margin rate and lower
selling, general and administrative expenses in dollars and rate, partially
offset by the impact of lower net sales in the first quarter of 2014.
Net Sales
Net sales for the first quarter of 2014 decreased $108 million or 1.7% compared
to the first quarter of 2013. On a comparable basis, net sales for the first
quarter of 2014 were down 1.6% compared to the first quarter of 2013. Together
with sales of departments licensed to third parties, first quarter of 2014 sales
on a comparable basis were down 0.8%. (See page 20 for information regarding the
Company's calculation of comparable sales, a reconciliation of the non-GAAP
measure which takes into account sales of departments licensed to third parties
to the most comparable GAAP measure and other important information.) Sales in
the first quarter of 2014 were negatively impacted by a shift in the timing of a
promotional event such that a portion of the resultant sales occurred after the
end of the first quarter of 2014, as well as the weather. Geographically, sales
in the first quarter of 2014 were stronger in the southern regions, which were
impacted to a lesser degree by the weather. By family of business, sales in the
first quarter of 2014 were stronger in handbags, impulse apparel for the
millennial customer, active, kids and intimate apparel. There was positive
momentum in juniors sales in the first quarter of 2014, and also sales of
departments licensed to third parties performed well. Sales in the first quarter
of 2014 were weakest in the home categories, including big ticket.

MACY'S, INC.

Cost of Sales
Cost of sales for the first quarter of 2014 decreased $75 million and the cost
of sales rate as a percent to net sales of 61.1% was 10 basis points lower,
compared to the first quarter of 2013. The application of the last-in, first-out
(LIFO) retail inventory method did not result in the recognition of any LIFO
charges or credits affecting cost of sales in either period.
Selling, General and Administrative Expenses
Selling, general and administrative ("SG&A") expenses for the first quarter of
2014 decreased $41 million or 2.0% from the first quarter of 2013. The SG&A rate
as a percent to net sales of 31.8% was 20 basis points lower in the first
quarter of 2014, as compared to the first quarter of 2013. SG&A expenses in the
first quarter of 2014 benefited from lower retirement expenses (including
Pension Plan, SERP and 401(k) expenses), the impact of the cost reduction
initiatives implemented at fiscal 2013 year-end, higher income from credit
operations, lower expense in sales variable areas, and lower advertising
expenses due to a timing shift of advertising spend which will impact the
remainder of fiscal 2014, partially offset by the continued investments in the
Company's omnichannel operations. Retirement expenses were $19 million in the
first quarter of 2014, compared to $58 million in the first quarter of 2013.
Income from credit operations was $171 million in the first quarter of 2014,
compared to $166 million in the first quarter of 2013, reflecting continued
profitability of the portfolio.
Net Interest Expense
Net interest expense for the first quarter of 2014 increased $3 million from the
first quarter of 2013. The increase in net interest expense for the first
quarter of 2014 was due to higher levels of outstanding borrowings as compared
to the first quarter of 2013.
Effective Tax Rate
The Company's effective tax rate of 34.7% for the first quarter of 2014 and
35.8% for the first quarter of 2013 differ from the federal income tax statutory
rate of 35%, and on a comparative basis, principally because of the effect of
state and local income taxes, including the settlement of various tax issues and
tax examinations.

MACY'S, INC.

Important Information Regarding Non-GAAP Financial Measures
The Company reports its financial results in accordance with generally accepted
accounting principles (GAAP). However, management believes that certain non-GAAP
financial measures provide users of the Company's financial information with
additional useful information in evaluating operating performance. Management
believes that providing changes in comparable sales including the impact of
growth in comparable sales of departments licensed to third parties
supplementally to its results of operations calculated in accordance with GAAP
assists in evaluating the Company's ability to generate sales growth, whether
through owned businesses or departments licensed to third parties, on a
comparable basis, and in evaluating the impact of changes in the manner in which
certain departments are operated (e.g. the conversion in 2013 of most of the
Company's previously owned athletic footwear business to licensed Finish Line
shops).
See the table below for supplemental financial data and a corresponding
reconciliation to the most directly comparable GAAP financial measure. The
Company's non-GAAP financial measures should be viewed as supplementing, and not
as an alternative or substitute for, the Company's financial results prepared in
accordance with GAAP. Certain of the items that may be excluded or included in
these non-GAAP financial measures may be significant items that could impact the
Company's financial position, results of operations and cash flows and should
therefore be considered in assessing the Company's actual financial condition
and performance. Additionally, the amounts received by the Company on account of
sales licensed to third parties are limited to commissions received on such
sales. The methods used by the Company to calculate its non-GAAP financial
measures may differ significantly from methods used by other companies to
compute similar measures. As a result, any non-GAAP financial measures presented
herein may not be comparable to similar measures provided by other companies.

Notes:
(1) Represents the period-to-period percentage change in net sales from stores
in operation throughout 2014 and 2013 and all net Internet sales, excluding
commissions from departments licensed to third parties. Stores undergoing
remodeling, expansion or relocation remain in the comparable sales
calculation unless the store is closed for a significant period of time.
Definitions and calculations of comparable sales differ among companies in
the retail industry.

(2) Represents the impact on comparable sales of including the sales of
departments licensed to third parties occurring in stores in operation
throughout 2014 and 2013 and via the Internet in the calculation. The
Company licenses third parties to operate certain departments in its stores
and online and receives commissions from these third parties based on a
percentage of their net sales. In its financial statements prepared in
conformity with GAAP, the Company includes these commissions (rather than
sales of the departments licensed to third parties) in its net sales. The
Company does not, however, include any amounts in respect of licensed
department sales (or any commissions earned on such sales) in its
comparable sales in accordance with GAAP.

MACY'S, INC.

Liquidity and Capital Resources
The Company's principal sources of liquidity are cash from operations, cash on
hand and the credit facility described below.
Operating Activities
Net cash provided by operating activities in the first quarter of 2014 was $86
million, compared to $298 million provided in the first quarter of 2013, due to
lower merchandise payables relating to the timing of inventory receipts and the
payout of costs associated with the cost reduction initiatives implemented at
fiscal 2013 year-end.
Investing Activities
Net cash used by investing activities was $96 million for the first quarter of
2014, compared to net cash used by investing activities of $107 million for the
first quarter 2013. Investing activities for the first quarter of 2014 include
purchases of property and equipment totaling $63 million and capitalized
software of $49 million, compared to purchases of property and equipment
totaling $65 million and capitalized software of $50 million for the first
quarter of 2013.
Financing Activities
On May 23, 2014, the Company issued $500 million aggregate principal amount of
3.625% senior unsecured notes due 2024. The Company intends to use the proceeds
of this debt to retire $453 million of 5.75% senior unsecured notes maturing
July 15, 2014 and for general corporate purposes, which may include working
capital, capital expenditures and the repurchase of common stock under its share
repurchase program. As a result, this short-term debt was reclassified to
long-term debt as of May 3, 2014.
On May 14, 2014, the Company's board of directors declared a quarterly dividend
of 31.25 cents per share on its common stock, payable July 1, 2014 to Macy's
shareholders of record at the close of business on June 13, 2014. This dividend
is an increase from the previous quarterly dividend rate of 25 cents per share
and represents the fourth increase in the dividend in the past three years. Over
that period, the quarterly dividend has increased more than six-fold from 5
cents per share to 31.25 cents per share.
Net cash used by the Company for financing activities was $385 million for the
first quarter 2014, including $403 million for the acquisition of the Company's
common stock, primarily under its share repurchase program, the payment of $92
million of cash dividends, a decrease in outstanding checks of $11 million, and
the repayment of $5 million of debt, partially offset by $126 million from the
issuance of common stock, primarily related to the exercise of stock options.
During the first quarter of 2014, the Company repurchased approximately 7.4
million shares of its common stock pursuant to existing stock purchase
authorizations for a total of approximately $432 million. As of May 3, 2014, the
Company had $1,000 million of authorization remaining under its share repurchase
program. On May 14, 2014, the Company's board of directors approved an
additional $1,500 million in authorization to purchase common stock, bringing
the Company's remaining authorization under its share repurchase program
including this increase to $2,500 million. The Company may continue or, from
time to time, suspend repurchases of shares under its share repurchase program,
depending on prevailing market conditions, alternate uses of capital and other
factors.
Net cash used by the Company for financing activities was $275 million for the
first quarter of 2013, including $336 million for the acquisition of the
Company's common stock, primarily under its share repurchase program, the
payment of $78 million of cash dividends and the repayment of $5 million of
debt, partially offset by $100 million from the issuance of common stock,
primarily related to the exercise of stock options, and an increase in
outstanding checks of $44 million.
The Company is a party to a credit agreement with certain financial institutions
that requires the Company to maintain a specified interest coverage ratio for
the latest four quarters of no less than 3.25 and a specified leverage ratio as
of and for the latest four quarters of no more than 3.75. The Company's interest
coverage ratio for the first quarter of 2014 was 9.37 and its leverage ratio at
May 3, 2014 was 1.85, in each case as calculated in accordance with the credit
agreement.

MACY'S, INC.

Liquidity and Capital Resources Outlook
Management believes that, with respect to the Company's current operations, cash
on hand and funds from operations, together with its credit facility and other
capital resources, will be sufficient to cover the Company's reasonably
foreseeable working capital, capital expenditure and debt service requirements
and other cash requirements in both the near term and over the longer term. The
Company's ability to generate funds from operations may be affected by numerous
factors, including general economic conditions and levels of consumer confidence
and demand; however, the Company expects to be able to manage its working
capital levels and capital expenditure amounts so as to maintain sufficient
levels of liquidity. To the extent that the Company's cash balances from time to
time exceed amounts that are needed to fund its immediate liquidity
requirements, the Company will consider alternative uses of some or all of such
excess cash. Such alternative uses may include, among others, the redemption or
repurchase of debt, equity or other securities through open market purchases,
privately negotiated transactions or otherwise, and the funding of pension
related obligations. Depending upon its actual and anticipated sources and uses
of liquidity, conditions in the capital markets and other factors, the Company
will from time to time consider the issuance of debt or other securities, or
other possible capital markets transactions, for the purpose of raising capital
which could be used to refinance current indebtedness or for other corporate
purposes including the redemption or repurchase of debt, equity or other
securities through open market purchases, privately negotiated transactions or
otherwise, and the funding of pension related obligations.
The Company intends from time to time to consider additional acquisitions of,
and investments in, retail businesses and other complementary assets and
companies. Acquisition transactions, if any, are expected to be financed from
one or more of the following sources: cash on hand, cash from operations,
borrowings under existing or new credit facilities and the issuance of long-term
debt or other securities, including common stock.